How to Use This Calculator
- Enter your entry price — price you plan to buy
- Enter your stop loss price — price below entry where you exit if wrong
- Enter your take profit price — price above entry where you take profit
- Enter your trade size in dollars to see actual profit and loss amounts
- Get R:R ratio, trade verdict, and break-even win rate
Risk Reward Formula
Risk = Entry Price − Stop Loss Price
Reward = Take Profit Price − Entry Price
R:R Ratio = Reward / Risk
Break-Even Win Rate = Risk / (Risk + Reward) × 100
A ratio of 1:3 means you risk $1 to potentially make $3
R:R Ratio Quality Guide
| R:R Ratio | Quality | Break-Even Win Rate |
|---|---|---|
| Below 1:1 | Avoid | Above 50% |
| 1:1 | Poor | 50% |
| 1:1.5 | Acceptable | 40% |
| 1:2 | Good | 33% |
| 1:3 | Excellent | 25% |
| 1:4+ | Outstanding | 20% or less |
Why R:R Ratio Matters More Than Win Rate
Most beginners obsess over win rate. Professionals focus on risk reward. Here is why:
| Strategy | Win Rate | R:R | 100 Trades Result |
|---|---|---|---|
| High win rate, bad R:R | 70% | 1:0.5 | −$500 loss |
| Low win rate, good R:R | 35% | 1:3 | +$4,000 profit |
| Balanced | 50% | 1:2 | +$5,000 profit |
How to Set Proper Stop Loss and Take Profit
Stop Loss Placement
- Place below a key support level — not at a round number
- Use ATR (Average True Range) — stop loss = 1.5x to 2x ATR below entry
- Never move stop loss further away to avoid being stopped out
- Set stop loss first — then calculate position size based on it
Take Profit Placement
- Place at next major resistance level
- Use Fibonacci extensions — 1.618 and 2.618 levels are common targets
- Consider taking partial profit at 1:2 and letting rest run to 1:3+
- Never move take profit lower just to lock in profit early
Minimum Win Rate to Be Profitable
With proper R:R you do not need a high win rate to be profitable. The formula is:
Break-Even Win % = 1 / (1 + R:R Ratio) × 100
At 1:2 ratio — break even at 33% win rate
At 1:3 ratio — break even at 25% win rate
At 1:4 ratio — break even at 20% win rate
Frequently Asked Questions
Risk reward ratio compares the potential profit of a trade to its potential loss. A 1:3 ratio means you risk $1 to potentially make $3. Professional traders only take trades with a minimum 1:2 ratio to ensure long-term profitability.
A minimum 1:2 ratio is recommended — risk $1 to make $2. Experienced traders target 1:3 or higher. With a 1:2 ratio you can be profitable even with only a 40% win rate, which makes trading psychologically much easier.
Risk = Entry Price - Stop Loss. Reward = Take Profit - Entry Price. Ratio = Reward / Risk. A ratio of 3 means your potential reward is 3 times your potential risk. Always calculate this before entering any trade.
Yes. With a 1:3 risk reward ratio, you only need to win 25% of trades to break even. Win 30% and you are profitable. This is why professional traders focus on finding high R:R setups rather than chasing high win rates.
Take profit is a price level above your entry where you exit the trade to lock in your gain. Together with stop loss it defines your risk reward ratio before entering any trade. Setting both levels before entry is the foundation of disciplined trading.
A stop loss is a price level below your entry where you exit the trade to limit your loss. It defines your maximum risk and is the starting point for calculating position size and risk reward ratio on every trade.
Related Calculators
⚡ Risk / Reward Calculator
| Win Rate | 100 Trades Result |
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